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Nonwage Benefits in a Simultaneous Model of Wages and Hours: Labor Supply Functions of Young Females

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Author Info
Vella, Francis
Abstract

This article argues that the negative relationship between weekly hours worked and the gross hourly wage rate is due to the provision of fringe benefits. As the total weekly wage increases, employers and employees avoid taxation by substituting wages with nontaxable, nonwage benefits. The author produces a wage that incorporates the benefit effects and estimates the corresponding labor-supply elasticities. An estimator is presented for the wage/hours market locus and the structural labor-supply function. An empirical application indicates that an estimated negative labor-supply elasticity associated with the observed gross wage is reversed when the adjusted wage is employed. Copyright 1993 by University of Chicago Press.

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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 11 (1993)
Issue (Month): 4 (October)
Pages: 704-23
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Handle: RePEc:ucp:jlabec:v:11:y:1993:i:4:p:704-23

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  1. Matthew Gray, 2000. "The Effects of Unemployment on the Earnings of Young Australians," CEPR Discussion Papers 419, Centre for Economic Policy Research, Research School of Social Sciences, Australian National University. [Downloadable!]
  2. Gorodnichenko, Yuriy & Sabirianova, Klara, 2006. "Public Sector Pay and Corruption: Measuring Bribery from Micro Data," CEPR Discussion Papers 5585, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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